Wednesday, August 27, 2014

Black and Hispanic Entrepreneurs Face Discrimination When They Apply for Small Business Loans

By Marilyn Silverman

You’re
standing on line in your neighborhood bank. You want to start a small business,
or you want to expand a growing business. Business ownership is the name of the
game; it’s the American Dream. Small businesses are the lifeblood of our
economy—the government is always telling us. Well, someone ought to tell this
to the banks out there, since they’re making it difficult, if not impossible,
for Blacks and Hispanics to share a piece of that pie and obtain that loan.Whatever,
you don’t have the wherewithal to invest in yourself. What do have, however, is
a dream. It’s a truism that banks tend to approve small business loans. You’re a business owner, so ipso facto, your
neighborhood bank should approve your loan application.

Well,
I’m going to paint you a depressing and shocking scenario that is being played
out in banks today across America, the land of opportunity, but not for all.
You possess practically the duplicate credentials of that white entrepreneur
who is standing directly in front of you or directly in back of you in your
neighborhood bank. You both possess a professional demeanor in your attire—no
jeans, T-shirt or running shoes today. You both possess the identical education
credentials. You are both requesting $60,000 loans for the identical business
genre. That’s all you need to launch your business. Furthermore, you both
possess the same credit history and credit score. The only difference is the
color of your skin which should not make a difference but shockingly and deplorably, it does.

You
want to go to college, get a job and get an apartment—all the ingredients of a
successful quality of life that every man and woman living in the U.S.
deserves. But we all know that Blacks and Hispanics face discrimination in these areas.
Now, there’s a shocking milestone—for the first time ever—discrimination has
invaded the marketplace.

A
study was conducted by three business school professors from three respected
universities—Jerome D. Williams (Rutgers), Glenn L. Christensen (Brigham Young)
and Sterling A. Bone (Utah State), “Rejected, Shackled, and Alone: The Impact
of Systemic Restricted Choice on Minority Consumers; Construction of Self” and
published in the Journal of Consumer Research.
The academics utilized an interesting experiment —they recruited three Blacks,
three Hispanics and three whites to amass their shocking and deplorable
findings by sending them into banks as mystery shoppers, posing as business
owners needing loans. “Our research
offers evidence against the general assumption in the United States that choice
is equally distributed, democratized and available to all,” the authors wrote.

We
have the global reputation of being the land of opportunity which justifies the
massive influx of immigrant to our shores. But not everyone can enjoy these
opportunities.

Unbeknownst
to that Black or Hispanic business owner in that neighborhood bank on a crisp
morning, is that he is going to be the beneficiary of less information
vis-à-vis his white counterpart and is going to be asked many, many, probing
questions. He will receive far less
information on the loan terms and requirements which is dominated by a plethora
of facts and figures. Business owners should be able to put their faith and
trust in the bank, confident that they can explain its many provisions and
clauses. Will he be handed a business
card that as per business etiquette occurs at the end of the meeting signaling
that they will be embarking on a long-term relationship? Not very likely. But they can most certainly be assured of
unpleasantness –their personal financial status will be probed and furthermore,
they are not likely to have that loan request approved. And, according to Alicia
Robb, co-author of the Kauffman Firm Survey, Black and Hispanic entrepreneurs
are less likely to even apply for loans for fear of rejection.

According
to the SBA’s Office of Advocacy, the Federal Reserve and the U.S. Department of
Commerce Minority Business Development Agency, Blacks and Hispanics are
compelled to pay higher interest rates that takes quite a sizable bite out of
their profits.

These
insurmountable barriers to secure funding may have a detrimental impact on the
budding entrepreneur’s quest to start their business or on the long- term
success of an existing business. The collaborators
on this study, wrote, “Not only does restricting a person’s choice threaten the
success of a new business, it also has…damaging effects on the individual’s
self- esteem and their personal sense of control and power in the world.”

According
to BizBuysell.com, in today’s economic climate baby boomers are increasingly
facing retirement and increasingly the face of their buyer is Black or
Hispanic—that is wonderful news but how is that Black or Hispanic business
owner going to be able to buy that business without a bank loan?

It
is indeed brutal for Black and Hispanic business owners in their quest to get a
loan; as The Washington Post said, they “are treated significantly worse than
their white counterparts …even when all other variables—their credentials,
their companies, even their clothes—are identical.”

2 comments:

Small business owners are sometimes in big problems in need of cash advances. some of the owners are also suffering from bad credit situation. Small business financing companies like Delta Capital Group can help us to get the cash advance when needed easily.

This post is very useful for us. Because we have a lot of tips and tricks from this post. Thank you for this amazing post share.When Only the Best Loan will Do.We believe small business’s should flourish and prosper We are passionate about helping small business owners access the money they need to grow or manage their cash flow So we have taken the work out of getting a business loan And selected the best business loans in the market place for you.quick business loans